Britain to begin construction of first nuclear plant in two decades

Government hands a multi-billion deal to France’s EDF Energy

British PM David Cameron hopes to persuade voters he will secure economic recovery and ease the burden of weak wage growth compared to high bills, particularly for energy.The first new reactor in the UK in 20 years will be built by the French EDF.

Hinkley Point nuclear power station is seen behind rocks on a beach in Bridgwater, southwest England. Photograph: Suzanne Plunkett/Reuters

A deal to build Britain’s first new nuclear plant in a generation is due to be announced today.

The government has been in negotiations with French-owned EDF Energy over the Hinkley Point C project in Somerset for more than a year.

However, ministers are now believed to have agreed on a “strike price” — the guaranteed rate to be paid for electricity produced at the Somerset site.

British chancellor George Osborne removed another obstacle last week when he announced that Chinese firms will be allowed to invest in civil nuclear projects in the UK - even potentially taking a majority stake.

The two reactors proposed for Hinkley are a key part of the coalition’s drive to shift the UK away from fossil fuels towards low-carbon power.

The contract is due to run for 35 years, with the electric price increasing annually in line with CPI inflation. At full capacity the two reactors could provide up to 7per cent of the country’s energy needs. It is understood that ChinaGeneral Nuclear Power Group and China National Nuclear Corporation will be investing in the estimated £14 billion scheme.

One of the last stumbling blocks to a deal was removed last week when Mr Osborne announced that Chinese firms would be allowed to invest in civil nuclear projects in the UK — even potentially taking a majority stake.

British energy secretary Ed Davey insisted he had secured “good value” following more than a year of intense negotiations. The project will cut the UK’s carbon emissions by nine million tonnes a year, and create thousands of jobs. “We think it would be good value if (the strike price) was a little higher,” the Liberal Democrat cabinet minister said.

“I was determined to get them below £90 so I could prove to everybody we had got a good deal... “What has driven a tougher deal is the fact that I made clear we could walk away from the table. We had other nuclear options.”

He added: “We have got an early start on our long-term energy needs.”

Mr Davey stressed that the construction risks were being borne by the companies, and the government would not be on the hook for any overspends. However, if costs fell, the taxpayer would share in the savings. There are also protections for the government in the event that the firms are able to refinance and boost profit margins. All decommissioning and waste management costs are also included in the deal, he said.

The initial commercial agreement is not legally binding until EU clearance has been secured for the state aid. A final contract is expected to be signed next year. The announcement comes with energy policy high on the agenda after the Big Six power firms began unveiling hikes of more than 9 per cent in electricity and gas prices.

Labour leader Ed Miliband has sought to gain the political initiative by pledging to freeze retail prices for 20 months if he wins the 2015 general election.

The Archbishop of Canterbury, the Most Rev Justin Welby, and deputy prime minister Nick Clegg both raised concerns about the increases yesterday. Mr Welby told the Mail on Sunday the companies had to be “conscious of their social obligations” and “behave with generosity and not merely to maximise opportunity”.

Mr Clegg demanded more evidence that the hikes were needed at all. “Clearly the companies need to justify the bill increases that they are now announcing,” the Liberal Democrat leader told Sky News’ Murnaghan programme.

“It cannot be right that people who are really struggling — many, many people still struggling to pay their weekly, their monthly bills, where electricity and gas bills for this winter are a looming worry — it can’t be right that those bills are increased for those households in our country and yet it is all rather opaque about what drives these increases.

“Because some of the companies are not really open enough yet and transparent enough yet about their own balance sheet.”